Best View on the Block
Ed and Cathy Davis set out to buy a new TV and instead came home with the key to instant popularity in their neighborhood: a 56-inch digital television set.
“We’re talking about putting bleachers in the living room,” joked Ed, 34, who works at the Navy’s Fleet Training Center in San Diego. “It gets crowded over here on Sundays. If you get up to go to the bathroom, you lose your seat.”
Since the first digital TVs appeared on the market this year, a handful of consumers--like the Davises--have rushed to purchase a set despite the lack of programming and the eye-popping price tag.
But unlike other new electronic products, digital TV has the potential to appeal to a wider audience, analysts say. That’s because unlike computers, televisions and remote controls are already familiar to most people and are easy to operate.
“We think instead of depending on who’s a big tech adopter, digital TV is going to depend on who’s a big entertainment enthusiast,” said Josh Bernoff, an analyst at Forrester Research in Cambridge, Mass.
That’s certainly true of Terry L. Schnitker. A self-described “video freak,” the Long Beach resident recently bought a $6,000 digital-ready TV, which he plans to use to showcase his 1,400-title videocassette library.
“This was a dream. I never figured I would get a high-definition TV, because I thought it would be too expensive,” said Schnitker, 51, a Boeing mechanic. “I figured they would cost at least $10,000 when they first came out.”
Of course, not all consumers will be as excited as Schnitker was about a $6,000 price tag. The Davises, for example, took out a loan from the naval credit union to buy their $5,500 set. Bernoff said digital TV buyers tend to have higher incomes and homes big enough to accommodate the sets, the smallest of which has a 40-inch screen.
A Forrester Research study predicts about 35.8 million households--or one in three families--will own a digital TV set by 2007. (The federal government has mandated that all television signals be broadcast in digital form by 2006.) Eleven million more families will own set-top boxes that decode digital signals for analog TV sets, the study says. Early sales figures for digital TVs are not yet available.
Consumers spend an average of $400 for a new TV, and a recent survey by the Yankee Group shows that fewer than 10% of Americans expect to spend more than $800 on a set. And, analysts say, most people won’t even buy an HDTV until the price falls under $1,000.
For Debbie Manneck and her husband, Art Kyser, price wasn’t as much an issue as the desire to be the first on their block to own a digital TV.
Manneck and Kyser, who install dry-cleaning equipment for a living, decided to buy the digital TV to beef up their home theater system, which includes a DVD player, a surround-sound system and a new VCR.
The absence of digital programming doesn’t bother the San Diego couple, who say that the sitcoms they watch every night look much better on the digital set. San Diego stations are scheduled to start broadcasting digital programming next fall.
The lack of programming doesn’t matter to real estate appraiser Jim Freitas either. His decision to buy a $4,950 digital-ready TV naturally followed his choice to sign up for digital satellite service.
“I didn’t think the price would come down that much in the next year,” said the San Diego resident. “I was replacing a TV I had for eight to 10 years, so I was due another one.”
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Freitas, who said his TV is on “basically all the time,” bought one of the first VCRs on the market in the early 1970s and was among the first in line to buy a digital TV to watch the 500 channels he gets with the help of a large satellite dish in his backyard.
“There are so many things on there that I haven’t tried yet,” Freitas said. “One that I’m interested in is that when you get a phone call and you’re watching something, you can tape it and play it back in increments faster than it recorded. So you can catch up on the story.”
Digital TV is seen as more likely to catch on in Southern California than in other parts of the country, in part because of the region’s strong entertainment roots. In Los Angeles and 41 other markets, a limited amount of programming is available.
But for most consumers, the lack of programming is likely to cause them to postpone buying a digital TV. And the prices of sets are unlikely to fall until there’s more programming.
“There’s very little money in manufacturing TV sets, so this is the start of a brand-new moneymaking opportunity for the people in TV,” Bernoff said. “They want to charge as much as possible for the early adopters before the price comes down and it turns into a highly competitive blood bath like the rest of the TV industry.”
In the meantime, many people will have to settle for digital TV in commercial settings, such as bars.
At the Hyatt Regency in La Jolla, general manager Allan Farwell has found that the HDTV in the hotel’s sports bar has been a hit not only with hotel guests but also with the community.
“This isn’t a throwing-popcorn-at-the-screen and drinking-beer-out-of-cans type of place,” Farwell said. “A $5,000 investment to build a clientele is a lot quicker as a one-time cost than constantly spending something on promotions.”
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Adoption Plans
Experts think digital TV could catch on about as fast as videocassette recorders and CD players did. Which isn’t very fast. It took about 10 years for each of these technologies to reach a 50% penetration rate in the U.S. A look at the adoption curve for various products:
1998
VCR: 88.6%
Answering machine: 74.4%
Cordless phone: 66.7%
CD player: 66.7%
Cellular phone: 36.3%
Approximate year introduced: VCR, 1975; Answering machine, 1971; Cordless phone, 1982; CD player, 1983; Cellular phone, 1983
Source: Yankee Group Technologically Advanced Family Survey
